Last week Warren Buffett bought a newspaper.
Really. He did. His company, Berkshire Hathaway purchased the Press of Atlantic City, New Jersey, for an undisclosed price. The Press has a daily circulation of 67,000 and a Sunday circulation of 77,000--in southern New Jersey. BH Media, a division of Berkshire, now owns about 30 daily newspapers.
Does this strike you as strange? Everything I read and hear keeps telling me that newspapers are a dying industry. Circulation is way, way down. Everyone's getting information online nowadays. No one (besides me) reads newspapers any more. So why, in the face of all this negative opinion about print media, would one of the world's most well-known and admired investors invest money in print media? I've never met Warren Buffett or had the opportunity to interview him for this column. I'm not privy to the details of this deal. And for all I know there may be a treasure chest of gold buried underneath the offices of the Press of Atlantic City. But assuming that's not the case, I can think of a few good reasons why he would do this--reasons that have little to do with the newspaper business, but have a lot to do with business in general.
Warren Buffett, like any smart business person, knows that even though some markets may be shrinking, they can still be very profitable. There's no question that the newspaper print industry is in decline. Just like the PC industry, book stores, rental videos, and records. But a declining market doesn't mean no market at all. It just means a smaller market. For example, it's been big news that the PC industry is suffering an enormous decline because of the growth of tablets and other portable devices. In 2012, global worldwide shipments of PCs declined 1.2 percent from the prior year. But here's the thing: in 2012 there were still 348.7 million PCs shipped! Since 1980, the three commercial evening newscasts have lost 28.9 million viewers, or 55.5 percent of the audience they once had. But there are still six million and seven million people who watch the CBS Evening News every night. No one can argue that e-books have cut into the bookstore business. But many are now reporting that there's still plenty of money to be made as an independent bookseller. No one wants to be in a declining industry. But if there's still money to be made, well, then there's still money to be made. Growth is good. But it's not everything.
I am old. I admit it. And I get a lot of my news online. But I still read the newspaper. In fact, my favorite newspaper is The Main Line Times. Never heard of it? That doesn't surprise me. It's my local weekly. And I love it. It has content that has more immediate affect on me than what's going on in Washington, London, or Tehran. (A new Indian restaurant is opening on Lancaster Avenue? Awesome!) It has a good mix of opinion pieces, news, photos of social events, and updates on local high school teams that keep me entertained, mainly because I'm familiar with many of the names and faces (unfortunately some are in the police blotter as well, but, hey, that's kind of fun too). I'm a solid and loyal customer of my local paper.
And customers like me are the most important thing to a buyer like Warren Buffett. While the Press of Atlantic City has, like all other newspapers, suffered a print circulation decline, the people who remain subscribers are proof that there are many readers who still like to get news in the form of a daily paper. Otherwise, they'd be gone. So local news is still very much in demand. As long as there's good content there will be an audience. The trick is to keep that audience happy while expanding product offerings to them. There's no reason why the new publisher of the Press of Atlantic City can't, with a little capital from its new owner, provide more content online to attract a more mobile audience too. Plus, there's very little competition in the Atlantic City area. A good local paper that makes it a priority to deliver valuable content through various channels will continue to keep their loyal following and always attract advertisers.
So what does Mr. Buffett's investment teach us? Three important things.
Sexy Isn't Significant
Unless you plan on attracting venture capitalists or going public someday, don't worry if your business isn't sexy or exciting. A local newspaper certainly isn't. Most businesses aren't. Most businesses are job shops, gas stations, pizza restaurants, and distributors. There are great companies all over the world making products that you and I have never heard of. They are located in industrial parks, near airports, in the back of parking lots, and in the basements of buildings. They might not be growing at all. But it doesn't matter. As long as they're profitable. And they have solid and loyal customers.
Profitability Is More Important Than Growth
For the last six years my company's revenue has been flat. But the company has been profitable. I visit and speak to hundreds of businesses every year, including the ones in my own neighborhood, that are in the same boat. But we're doing fine. That Chinese restaurant a half a mile away is always busy. The paint store near the train station has been around for years. They both have loyal and solid customers. They're both providing good products. Could they be doing better? Absolutely. More customers would help. But better management would help even more. I'm sure the new owners of the Press of Atlantic City have their marketing plans to retain and their readership to grow. But I'm also sure they have a few tricks up their sleeves to run the business more efficiently too. This is Warren Buffett, remember.
It Doesn't Matter What You Sell, as Long as You're Good at It
In Philadelphia there are about a half dozen small companies that provide "blacksmith services." No, this isn't the 18th century. I don't think being a blacksmith is a growth business. But there's a market for it. Maybe you make dogs' wigs, "fresh face pillows," or rent yourself out as a temporary friend (and yes, there are real businesses that do this). It doesn't matter. As long as the market is big enough, and you're excellent at doing it, your small business can earn you a decent living. And if you run it the right way, it can do even more than that.
So don't listen to the experts. Don't think you have to be in a growing industry. Don't worry if your friends and family laugh at your idea. Do your research. Make sure the opportunity is there. And be serious about running your business profitably. There's money to be made everywhere. Even in the newspaper business. Just ask Warren Buffett.